Reclassification lifeline for Namrup-IV plant

The recommendation by the Parliamentary Standing Committee on Chemicals and Fertilisers to reclassify Public Sector Undertakings (PSU) like Brahmaputra Valley Fertiliser Corporation Limited (BVFCL) at Namrup as part of the “strategic sector” under the Public Sector Enterprise (PSE) policy framework has underscored the critical importance of the fertiliser plant. The parliamentary panel has also recommended to the Department of Fertilisers to proactively coordinate with Joint Venture (JV) partners, the Assam Government, and relevant stakeholders to fast-track the project of the proposed Namrup IV plant. Expeditious commissioning of the proposed plant within the set target of four years is also crucial for the availability of fertilisers in Assam and other states in the Northeast region. The incorporation of the JV company – Assam Valley Fertiliser and Chemical Company Limited on July 25 – has indicated the progress and brightens hopes for mechanical completions and commissioning by 2029. The BVFCL continuing to receive operational support through budgetary grants to bridge its working capital and maintenance gaps, as recommended by the committee, will be crucial to stave off any sustainability issues cropping up for BVCL in the interim period. Under the new PSE policy notified by the central government in 2021, the public sector commercial enterprises have been classified as strategic and non-strategic sectors. The policy envisages retaining the bare minimum presence of the existing public sector commercial enterprises at the holding company level under government control. The remaining enterprises in a strategic sector will be considered for privatisation or merger or subsidiarisation with another PSE or for closure, while PSEs in non-strategic sectors shall be considered for privatisation, where feasible; otherwise, such enterprises shall be considered for closure. Reclassification of BVFCL as part of the “strategic sector” is, therefore, a must to rule out privatisation or closure. The committee notes in its report that BVFCL has been facing persistent financial stress, with a negative net worth, high liabilities and insufficient internal accruals for sustained operations. Ironically, BVFCL pioneered the production of urea from natural gas in India with its first unit commissioned way back in 1969. When the country has been striving to reduce import dependence for meeting its urea demand, the revival and expansion of the significance of the only fertiliser manufacturing company in the entire Northeast region is already well established. The Union Cabinet’s approval in March for the 12.5 Lakh Metric Tonnes (LMT) annual capacity Ammonia-Urea complex under the JV set the ball rolling for the revival of the Namrup fertiliser plant. Apart from meeting fertiliser requirements in the region, the plant, when commissioned, will cater to growing urea demand in West Bengal, Bihar, Eastern Uttar Pradesh and Jharkhand, which signifies its critical role in the national fertiliser supply chain and in the country’s food security and is not limited to only the revival of an industrial unit in the state for industrial growth or generating employment. Chronic delays in project execution leading to cost escalation have been posing hurdles in industrialization and infrastructure development in the region, and ensuring that the execution of the Namrup IV plant is not marred by such deficiencies will be crucial to ensure that the set deadline is not missed. Availability of natural gas to meet the production demand of the proposed plant will be critical for its sustainability. An official report of the Department of Fertiliser under the Ministry of Chemicals & Fertilisers on BVFCL highlights that Namrup Unit II plants were operated at 50% of the capacity after they were revamped in 2005, due to non-availability of natural gas beyond the contracted quantity. The parliamentary committee observed that the shutdown of Namrup-II and limited production from Namrup-III have severely impacted revenue generation, making it difficult even to meet basic maintenance needs. Therefore, the BVFCL continuing to receive grants-in-aid from the central government will be vital to carry out maintenance tasks so that the Namrup-III unit with an installed capacity of 2.7 LMT remains functional and keeps production at an optimal level in the interim period. Urea distributed to farmers across the country is heavily subsidised, and each bag of 45 kg is made available at RS 242, and, therefore, unlocking the amount spent on importing the shortfall through achieving self-reliance in domestic production is vital for the country’s economic growth. Staying focused on the role of the JV in contributing to the national goal of self-reliance in urea production will also keep reminding us of the importance of commissioning the project on time. As the largest stakeholder in the JV with 40% equity, the state government will be expected to play the most crucial role in expeditious completion of the project and to boost agricultural growth by ensuring adequate availability of urea for increasing production. Ensuring transparency and financial discipline, a lack of which adversely affected many PSEs in the country and led to their closure, will be critical for meeting the deadlines and sustainable production.